ECO­NOMIC OUT­LOOK FOR 2021 AND 2022

(SUM) The per­for­mance of the global econ­omy dur­ing the sec­ond year of the coro­n­avirus pan­demic varies con­sid­er­ably be­tween sec­tors and re­gions. In­dus­try is in­creas­ingly re­cov­er­ing from its slump in the spring of 2020 due to ris­ing de­mand for goods, while the sit­u­a­tion in consumer-​related ser­vices in par­tic­u­lar re­mains tense. Over­all eco­nomic ac­tiv­ity, par­tic­u­larly in China and other Asian coun­tries as well as the United States, con­tin­ues on an up­ward tra­jec­tory. The re­cov­ery in Eu­rope, on the other hand, is paus­ing. How­ever, the higher in­fec­tion rates and stricter con­tain­ment mea­sures are in­flict­ing much less dam­age on the econ­omy than dur­ing the first wave of in­fec­tions in spring 2020. One rea­son for this is the pos­i­tive trend both, in in­dus­try and in goods trade. So far there has been no mas­sive dis­rup­tion of in­ter­na­tional sup­ply chains or wide­spread bor­der clo­sures. It is also likely that house­holds and firms have adapted bet­ter to the pandemic-​related re­stric­tions.

Al­though eco­nomic out­put in Ger­many was still grow­ing mar­gin­ally at the end of 2020 a de­cline is ex­pected for the first quar­ter of 2021. The eco­nomic re­cov­ery is likely to re­sume over the com­ing months as the pan­demic is in­creas­ingly con­tained and re­stric­tions are grad­u­ally eased. This re­cov­ery will be as­sisted by the grow­ing avail­abil­ity of vac­cines. If plans to ac­cel­er­ate the vac­ci­na­tion pro­gramme are suc­cess­ful, this should allow for more eco­nomic ac­tiv­ity. The value added that can­not take place par­tic­u­larly in the ser­vices sec­tor at present should then re­turn grad­u­ally and gen­er­ate strong growth through­out the re­main­der of 2021.

The Ger­man Coun­cil of Eco­nomic Ex­perts (GCEE) ex­pects gross do­mes­tic prod­uct (GDP) in Ger­many to grow by 3.1 % this year. The eco­nomic re­cov­ery is set to con­tinue apace next year as de­mand rises world­wide and con­sumers run down the sav­ings that they have ac­cu­mu­lated. The GCEE ex­pects GDP to grow by 4.0 % in 2022. Con­sumer price in­fla­tion is likely to rise tem­porar­ily this year es­pe­cially as a re­sult of higher en­ergy prices and the ex­piry of the VAT cut. The GCEE is fore­cast­ing that the rate of in­fla­tion in Ger­many will av­er­age 2.1 % and 1.9 % in 2021 and 2022, re­spec­tively. It ex­pects GDP in the euro area to grow by 4.1 % and 4.2 % in 2021 and 2022, re­spec­tively.

Ger­many and Eu­rope are cur­rently ex­posed to the risk of a third wave of in­fec­tions, which is being ex­ac­er­bated by the spread of mu­ta­tions of the SARS-​CoV-2 virus. A sharp rise in in­fec­tion rates could delay eco­nomic re­cov­ery, es­pe­cially if in­dus­try was se­verely af­fected by re­stric­tions and plant clo­sures. In con­trast, swifter progress on vac­ci­na­tions could con­tain the pan­demic sooner, allow re­stric­tions to be lifted and ac­cel­er­ate re­cov­ery.

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PNGPNG (transparent)SVGSVG (transp.)